Economists deployed their arsenal of synonyms for "weird" Friday in trying to describe the December jobs report, but the message was clear: What the heck happened?
Many expected payrolls to swell by around 200,000 jobs. So you could just feel the jaws dropping up and down Wall Street at 8:30 a.m. when the Bureau of Labor Statistics reported a meager gain of 74,000. Even the unemployment rate, which declined to a lower-than-expected 6.7 percent from 7 percent in November, fell largely for the wrong reason—people leaving the workforce. "This is just one of the most unusual reports, really, I've seen in quite a long time here," said Douglas Handler, chief U.S. economist at IHS Global Insight.
What happened? Why were the forecasts so off the mark? Or will BLS change its numbers when it revises them next month? We won't really have a better sense until Feb. 7, when the agency releases its next employment report.
In the meantime, economists have a few ideas:
- Blame the weather. Some exceptionally bad weather last month might have dragged down construction employment, which fell by 16,000 in December, and brought overall payroll numbers down by between 50,000 and 75,000, Morgan Stanley economists estimate. BLS also cited "unusually cold weather" as a potential culprit for a decline in contractor employment. But the weather doesn't appear to account for all of the weakness.
- Things are not really getting better, faster for the labor market, and this is just evidence we were too optimistic in making our predictions. The average job growth per month in 2013 (182,000) doesn't look all that different from 2012 (183,000) or 2011 (175,000). And labor force participation—a measure of people who either have or are looking for jobs—continued to decline last month, falling by 0.2 percentage points and offsetting an increase in November. The weakness in the December jobs report was pretty much across the board: There was not a lot of good news to be found, other than the possibility this was just a strange blip.
- Things are really getting better for the labor market, and this is just noise. This theory says the numbers are so out of line with November's gain of 241,000 jobs, and an overall solid economic end to 2013, that it's probably just due to some strange seasonal-adjustment factors (the way the government smooths out its numbers to account for different behavior in different seasons) and weird weather. That combination means this report really doesn't say all that much: Stick to the three-month averages or longer for the real story. "There's a lesson to be learned, I think, from the data that you don't take the recovery for granted, but I do think this is going to be seen more as an aberration than anything else," said IHS's Handler.